Small banks’ presence in Georgia poses no risks

Azerbaijan, Baku, April 22 / Trend E. Kosolapova/ Presence of small banks on Georgian financial market poses no risks to the country's banking sector, Georgian National Bank told Trend via e-mail. "Although the majority of the banks obviously share only a small share of the market, their presence does not pose any risks/inefficiencies to the sector as long as they remain adequately capitalized and governed in a way that is relevant to their business model and activities undertaken," the National Bank said. Earlier Fitch Ratings Manager James Watson said in an interview with the Georgian newspaper The Financial that given the volume of the economy, an excessive number of banks are operating in Georgia. However, Georgian National Bank urges the small banks to merger. "National Bank would only welcome if market forces drive enlargement of activities of small institutions either via mergers or on its own as relatively larger players on the market could enhance competition in the sector," the Bank said. According to the National Bank, Georgian banking sector was represented with 17 banks and 2 foreign bank branches as of February 2012. All of the institutions rely on foreign capital participation according to analysis of beneficiaries. The top 5 banks accounted for 81 percent of total Georgian assets and 81 percent of gross loans as of February 2012. Do you have any feedback? Contact our journalist at agency@trend.az